Australia: The 'New' Switzerland?

Switzerland is the place that has traditionally stood above all the rest in its reputation for financial stability.

Why? Because the currency was well-managed, the banking system was sound, and the country had a long tradition of treating capital well.

Over the last few years, however, these advantages have collapsed.

Switzerland has voluntarily surrendered banking privacy, and the many Swiss banks are now hemorrhaging cash.

Even worse, the Swiss government destroyed its reputation for respecting capital when they pegged the Swiss franc to the euro in 2011 to arrest the franc’s rapid rise.

The country’s top central banker at the time, Philipp Hildebrand, claimed that he would buy foreign currencies in ‘unlimited quantities’ to defend the peg.

This is not something a responsible steward of currency should ever say. The currency peg was nothing more than a form of capital controls… and it effectively screwed anyone that had trusted the Swiss system with their savings.

Since then, the market’s need to find a financial safe haven has only become more desperate. One only needs to look at Cyprus to see why.

Yet just a small handful of countries inspire confidence in the marketplace. And the most popular seems to be Australia.

From a macro perspective, Australia is in much better shape than the rest of the bankrupt western hierarchy.

Though the national budget deficit has been rising over the last few years, Australia’s public debt as a percentage of GDP (less than 30%) is a tiny fraction of the US, France, Italy, etc.

Moreover, as the Australian economy is heavily dependent on resource exports, it’s a ‘commodity currency’, much like Canada. But unlike Canada which is wed to the US, Australia’s economy is much more closely tied to Asia’s growing dominance.

Perhaps most importantly, though, Australia is not printing money with wanton abandon like the rest of the world.

In fact, the RBA’s (Australia’s central bank) balance sheet has actually been -decreasing-, dropping from A$131 billion to just A$81 billion in 2012.

This constitutes a 38% decline in central bank assets in five years. By comparison, US Federal Reserve credit has grown 367% over the same period. This is an astonishing difference.

Plus, Australian interest rates here are typically much higher than in the US, Europe, or Canada. Just holding cash in an Australian bank account can yield over 4% in annual interest. It’s sad to say, but this is quite a bit these days…

(Attendees at our Offshore Tactics Workshop were able to open such accounts on the spot with an Australian bank representative; we’ll soon send out information about how you can do this as well…)

Now, there’s really no such thing as a “good” fiat currency. But given such fundamentals, it’s easy to see why Australia is replacing Switzerland as a global safe haven.

I’ve spent the last few days with some banker friends of mine, and they’ve been telling me about the surge of foreign capital coming into Australia from Europe, the US, and China.

But one thing to keep in mind, they reminded me, is that the Australian dollar has a loose correlation with the price of gold. After all, gold is Australia’s third biggest export.

Consequently, we’ll likely see a decline in the Aussie dollar if the gold correction continues to play out. This may prove to be a good entry point for individuals to get their money out of the US dollar.

tyler dudes, why do you not use Mish's analyisis? I see from you homepage that you guys follow his shit, and he has been on the money over the last few years. esp wit the treasury long call.even tho hes a bear

A third of the Australian share market is composed of banks, which are completely dependent on the property market, which is one of the biggest bubbles worldwide. When the property bubble starts popping, the RBA will move rates to zero to try and "provide a soft landing", ie provide a cash out opportunity for old cronies.

Large swathes of the leadership of both business and gov are criminals, as evidenced by recent corruption hearings outlining gov cronies involved in halfbillion dollar mining bribes. And then of course we have the manipulating investment companies with huge crossholdings:

Yeah the current desperation of the slimy real estate shills is palpable.

And the resources sector is in much worse shape even than people realize, because a large section is made up of supershitty juniors and explorers, companies that have never made cash and never will, but instead raise endless capital in malinvestment.

As a resident of Oz, I agree. I haven't seen Fosters actively marketed and available to purchase here for maybe 20 years.

Not that one would willingly throw down a Fosters - it was simply horrible...

The property bubble is still bubbling away nicely, we have sort of got to the "Oh, shit!!!" peak moment circa July '08 USA, and the entire property/financial edifice is tottering on the (so far - minor) downturn of the peak.

We have an openly Communist Federal Govt, who will legislate the country into penury as a "payback" for their ultimate trouncing in the next Federal eelction, in September 2013.

Australia will be OK for investment next year. At the moment, it is a basket-case.

Stone the fucking crows and starve the flamin lizards whit the fuck is this coot on about, we does so spik bluddy gud engrish, wel, all us whyte fellas from Italy and Greece does fer cripes sake. It them imports whats buggerin up the place, that fella capn Cook was the bluddy start of it all, strike a light its all true....I swear as true as me mothers a blackfella.

I wish I was this optimistic about my country's financial well being, but there are way too many domino's poised to fall(and are falling/have fallen).

We are some of the most indebted consumers on this planet.

Our government is a dysfunctional basket case. Fools, idiots and theives, the lot of them. The ultimate in self-serving bureacrats a nation could wish for. Policy's are a debacle - mismanagement and unmitigated waste of resources - pink batts, building school halls revolution, carbon tax, set top boxes farce, NBN blowout, "new" tax on super...the list goes on.

We are one of the most over-governed and regulated countries.

Our property bubble is of epic proportions. The government, RE industry and banks are doing their best to keep this bubble inflated as they know when this thing pops there will be fuckedness of 'epic proportions' for the consumer, RE, banks & government. And our manufacturing and retail sectors are currently in the toilet. Might also be worth checking how well our automotive industry is doing.

Our isolation is a double edge sword - we were late to party in arriving and soon to be leaving.

The stupidity of the few you say......what utter rubbish it took a very large number of lame brains to elect the current idiots, the average oz does not care...as long as the beer is cold the footy or cricket or the beach is in front of them....who cares about politics

The stupidity of the few you say......what utter rubbish it took a very large number of lame brains to elect the current idiots, the average oz does not care...as long as the beer is cold the footy or cricket or the beach is in front of them....who cares about politics

At the last Federal Election the result was a deadlock that ultimately left the whole kaboodle in the hands of 3 stooges (independents) to decide upon the formation of Federal Parliament for the entire country. Certainly didn't take "a very large number of lame brains to elect the current idiots" in parliament, unless you consider 3 to be a large number.

'...as long as the beer is cold the footy or cricket or the beach is in front of them....who cares about politics'.

Don't do any of those, but then again I'm not the average Australian (but will settle for the 'average oz' (Troy Ounce specifically) of Au as compensation for responding to this rant of yours).

FWIW; I voted neither of them, and the only reason I fronted a polling booth at all was due to the legal requirements of Australia with regards to mandatory voting (so you can toss aside the 'you voted at all' argument because it carries no weight down here; unless you intend to send a few oz's of Ag as well to cover the fines for failing to vote at the upcoming election).

the last place I want to leave the US for is a country he says is the place to go, seriously it's easier to get rid of a german cockroach infestation than it is to get off his email list, guy is a total douchebag

Australia is a commodity economy with upcoming problems with reduced China demand for those commodities.

That is correct. With the end of commidity supercycle the permanent promotion of commodities and commodity currencies by Simon Black and others realistically makes no sense (the same is true for Gold and silver). Having said that, I do keep some funds in Australia (in the name of diversification) because I need some yield as everybody else. Eventually, Simon Black with his base in Chile (another commodity country) will find himself in deep trouble cause their currency is going to be in trouble and much faster than AUD (he plans to buy another farm in Chile by borrowing funds in USD).

It's neck-and-neck with Canada. My wife has relatives in both countries so I tend have a bit of a reason to monitor (not like the relatives would listen to any warnings that I might offer, but it keeps me amused).

A real estate bubble or property bubble (or housing bubble for residential markets) is a type of economic bubble that occurs periodically in local or global real estate markets. It is characterised by rapid increases in valuations of real property such as housing until they reach unsustainable levels and then decline.

I knew Australia was in for trouble when it began handing out $16,000 "incentives" to buy a house. Obviously, a bigger handout bankers but it conned alot of people into buying boxes they could not afford esp with the inevitable economic slowdown.

Sad for all those underwater Australian house owners/debtors...welcome to the American way of life.

Yeah those evil unions! Is that why my wife gets $26.50 an hour weekdays, $37.50 an hour Saturdays and $47.00 an hour Sundays for her cleaning job in Adelaide. No sign of a union rep anywhere trying to sign her up in 6 months.

There was a large amount of fast moving international fiat of mystery that invaded Australia during the 08-09 fiasco, couple the AUD appreciation with rising price of paper debt and its a huge profit to protect.

If the wrong person whispers "pull it" in a restaurant or country club- the Australian ponzi will collapse faster than WTC7. People are positioning for a strategic and FAST exit not entry right now. The loosers will "blame" whoever is convenient - Chinese commodity demand, lack of Australian housing demand, excess Australian government, but the carnage will be result of the pre-flight bank run of those mysterious foreign digital digits.

And Wrong-Way Corrigan is holding the door open for the suckers eager to chase yield and in the process surrender their fiat in order to finance the exit of those they despise most...

Wealth goes where its appreciated. Funny thing, I've met people from Australia enroute to Grand Cayman via the US. Wonder why that is? Could it be even they are looking for a place to hide their last dollars?

"mega buxs are treated best where they don't exist in the first place." no doubt there. Why would a country export it's gold again? Right up there with exporting oil and natural gas in my book. In fact why do we export anything actually? You want an F-35? That'll be ONE TRILLION DOLLARS bitch.

It's not the SNB it is the Federal Council, and this has been going on at least since some Jews stated started up-ending couch cushions looking for pennies (and relatives' gold tooth fillings) that they didn't the have proper paperwork for... Being Jews- they're not half as wise or smart as they think they are, particularly given the resurrection of anti-Antisemitism and Fascism now on a world-wide scale.

People forget that in the 1930's people had a legitimate fear of the Fascist state confiscating their wealth, and people came to Switzerland and entrusted Switzerland to keep their property out of the hands of the Fascist State. What has happened over the past decades is that in effort to gain PR brownie points with the international community the Federal Council has decided that whatever despot controls the ballot box in a given State is the lawful owner of all deposits in Switzerland of that State's subjects.

Qaddafi, Mubarak, the French Tax Minister... what happens if the government of KSA falls, given the States' proclivity for assuming the worst and confiscating private property in a misguided effort to curry favor with newest despots on the block - any successful Saudi would be a fool to trust any Swiss banker. And any banker in Switzerland knows full well the ramifications of what I'm writing.

Wasn't there also some policy to increase the white population (out of fear of being overrun by "Asians")? They were paying white folks to breed. And on a landmass whose carrying capacity is already on the brink!

LOL! No they did not care who they handed the baby bonus too, black, white, and all shades in between, but it nearly all went to the equivalent of what you'd call "trailer trash". Single mothers churning out babies as quick as they could for their $6000 bonus. Fu#@ing insane!!! This was a Liberal (conservative) devised policy, which of course Labor wholeheartedly went along with once they got into power. The whole lot should be hanging from lamp-posts! These kids that are a result of this madness are the worst in society, They are the next generation of welfare recipients. Brilliant!

Come on, it worked. Would you have rather they handed it to the banks instead? Given what the Fed has handed over to banks in taxpayer money, perhaps someone can tell me how much it now adds up to per person in the U.S. It would have made far more sense to let these thieving bastard banksters crash and burn and given half of that money to taxpayers to go on a spending spree instead.

1) "The Australian government has just announced new rules which penalize citizens who have responsibly set aside savings for their own retirement. Any income over A$100,000 drawn from a superannuation fund (the equivalent of an IRA in the United States) will now be taxed at 15%. Previously, all such income was tax-free."

2) Saving Accounts with anything from $1 upwards that have not had any deposit or withdrawals in the past three years will be transferred to the Australian Securities and Investment Commission. -STOLEN

3) The failure of gun control in Australia. Here are some of the numbers of this failure: Armed robberies are up 69%, assaults with guns are up 28%, gun murders are up 19%, and home invasions are up 21%.

The Fabian Socialist Union Organiser Prime Minister is a "special friend" of Israel (see here (Youtube)), and the two front runner opposition candidates to oppose her at the next "election" are both Jesuits!! A former candidate to oppose a previous Socialist PM was a former Goldman Sachs VP, and senior party figures from both "left" and "right" regularly change sides to improve their chances at the swill trough! The same Kayfabe as everywhere else....

We have one of the biggest property bubbles in the western world which is yet to burst. The solution at the moment is to try to import as many bodies with cash from overseas to keep it propped up. When the govt sponsored property ponzi scheme busts here, the view on Aus will change to a more accurate one.

OzLand is ridiculously overpriced...houses, food, etc...you name it...too expensive. And as the above posts staes, they desperately try to attract wealthy foreigners...take a walk by their med or law schools or Uni's...packed with Chinese from Singapore and HK paying full (overpriced) tuition.

It's gonna correct as China slows down and cuts coal, iron, and so on. Wait 5 years...it's gonna get lots cheaper Down Under.

Australia may be attractive - NOW, as the rest of the World is being manipulated, fracked, crushed, raped, murdered, destroyed, etc. by the US and all that hangs off it, but that just makes Australia probably the next-in-line.

No China: no jobs, no exports, no small business, no service industry and LOTS of taxation and more coming. Most un-affordable houses in the World. And an obedient and US slavish "puppet" entrenched as "government". And Yes, a Colony of the United Kingdom and a population of around 23 Million (about as big as LA and Orange Counties and or Malaysia).

You may call it the last line of defense, but: < http://tinyurl.com/7m8uvo7 > as the USA beats its drums of war (does it ever stop?) -

Yes, Hot Money is always welcome. Did I mention the incompetence of the government and all that hangs off them? But, most Australians are very cool and friendly.

Look into the shifts in rainfall over the last 5 years. Then do an over-lay chart of "Population >50,000". Northern Rainforest is loving it; East coast is toast. West Aus is all like "WTF RAIN"... then floods, which is wasted.

This was ignoring the massive housing bubble there, or the fact that so much raw material exports are tied to China. Australia is toast, it's just... not had any honey put on it yet, compared to Cyprus and Greece.

True, there are things to like about the Aussie - relatively high interest rates (but still at record lows) and a strong currency, so it will be better able to absorb the coming shocks to the system. But it is still seen as a risk based currency, which means it is err risky, and with it losing 37% of its value back in 2008 (CHF lost about 17%), its a bit soon to be saying it's as safe as the Franc. CHF gained significantly probably from local euro outflows when the USA was downgraded and when Italy was in trouble in 2011, - the aussie lost about 12%

Oh yeah, and if the next budget happens to not be too in the red, it will just have been because the government is confiscating all bank accounts that have had no deposits or withdrawals for 3 years (including term deposits which are not normally touched) in a sneaky bill passed quickly at the end of last year. You can apply to get your money back, but it is expected to take months (i.e will be after the budget next month).

A lot of people are talking about high real inflation and difficult times and with mining waning in a two speed economy, all it will take is a significant slowdown in China or a shock from Europe (and these will happen eventually) and the carry trade will unwind.

Who knows where gold is going.

If the aussie has survived the crisises over the next 5 - 10 years maybe we can revisit this.

75 Comments out of 5418 Reads. So... ~ 1% are in the Simon Hate Club. Which, I'm guessing, includes Gov trolls, who really hate him, cause their boss said so.

I can understand not agreeing with him or attacking his argument. These 1% though, aren't satisfied till they attacked the person too. Not surprising, being the cretin Carnival Barkers that they are.

They must really hate his friends, who were at the Workshop 2 weeks ago. Shady people like Nigel Farage, Jim Rogers, Jim Rickards, Peter Schiff and Ron Paul. Not to mention the 500 of us who spent a week there. But these 1% are no doubt richer and smarter than the rest. LOL.

let's see...switzerland has been a repository of secret/sacred wealth for several centuries...Australia...let's get something straight: You can trust an Aussie as much as you can trust Paul Hogan's "financial advisor".

I'll stay with the swiss chocolate thank you very much.

Simon Black...get your head out of your ass and take a look around. Moron.

And, by definition, all banks that are based on a fractional reserve system are insolvent. Fiat only makes the problem worse.

Since all banks world wide are insolvent, the only solution is remove all cash, stocks, bonds and funds and put it in something of tangible value. Preferably something with cash flow: rental income, food income, water, etc.

Managed currency by pretty much the only country left with a government that regularly runs a surplus, has de-linked interbank rates from the US, runs a trade surplus, has one of the highest stockpiles of foreign reserves in the world, one of the largest sovereign wealth funds, has major trade partners that aren't western, stable(-ish) political system, highly liquid and advanced financial infrastructure. Given that the entire SG economy runs on the premise of importing goods at one end nd exporting them straight away on the other, the government has no impetus to devalue the currency, and with no outstanding debt no impetus to destroy value with monetisation.

All in SGD. Heck, with a top tier tax rate of 20% and no capital gains tax, why not just live there?

As the Singaporean illegitimate son of soros I would advise against it because the damn locals are turning into bloody socialists.

Nationalistic pride is at an all time high with demands for social welfare which will equate to more taxes if the bloody plebian socialists gets their way. The socialists are going to destroy everything you have cited, they want a destruction of the Sovereign wealth fund(because they think it robs them), less foreigners in the labor force and foreign capital.

Hell, they even want the government to be responsible for helping them own cars and houses. All using our taxpayers money.

The primary concern is not really social welfare, more like inflated living costs (cars, houses). While they've got a point about the property bubble we should see this track back (or pop?) when the chinese demand slackens. Or reverses. A widescale deflation in the private-condo market would ironically probably be a plus-point for most of the locals as it would help alleviate pressure from the overbought HDB submarket.

Underneath it all is a undercurrent of feeling that the PAP is not listening to the complaints, or that they're an ivory-tower over-removed ruling elite. Which, to their credit they are doing fairly well at addressing. The groundswell has died back a bit recently and they haven't made any major mis-steps since the white paper release a couple of months back. They've got two years to recover market failure: a major crisis during this time would be a great political point for them to re-establish an image as "the great protector".

All of this implies that Singaporeans actually want change badly enough to actually vote about it instead of complaining.... and they're mostly too damn kiasu for that, lsat election non-withstanding.

Tl;DR: two more years until any major upheaval, safer than any other damn currency they've got going in the short term.

That's just great considering that this present government took over office with ZERO % debt and spent its little heart out building school halls and cramming roof spaces in homes with insulation in order to avoid the correction needed brought on by the GFC.

As a result a large portion of the population continues its home buying frenzy aided and abetted by lower interest rates.

Unskilled labour now costs around $22 an hour.

As soon as China pulls in its belt even by a small amount you will hear the moaning and groaning in an instant.

Good luck with this assessment.

Australia could well and truly have been heaven and not just a haven but when politicians think they are smarter than those who sweat throughout the day and risk their capital, then hell becomes a real possibility.

How can any "analysis" of Australia ignore the amount of private sector debt, the housing bubble, the risky concentration of the financial sector into four "pillar" banks, the Dutch Disease caused by mining, dependence on unsustainable Chinese growth, a current account deficit (despite being supposedly strong), the appallingly overvalued AUD, and the low sophistication of domestic investors (stox n real state mate). I could go on and on.

Oz is high risk. I have been using my AUD holdings to take advantage of relatively cheap PM prices of late (via the Perth Mint). It makes far more sense.